The Promise of Bitcoin

Image: jason_benjamin/Flickr

The Bitcoin debate is heating up. No matter which side you prefer, there’s no denying the promise of Bitcoin: its vast potential in terms of digital, peer to peer payments, and the future of currency. This is not to say that Bitcoin is without its flaws,(as in part evidenced by major Bitcoin exchange Mt. Gox filing for bankruptcy) but rather that, as the first of its kind, Bitcoin shows how cryptocurrency can emerge from the shadows and enter the public sphere of brick and mortar payments.

Theoretical threats to the success of the Bitcoin ecosystem do exist. In fact, what is often considered a major flaw in Bitcoin is what is known as the “51% attack.” There is a speculative argument that if someone were to control the majority of Bitcoin holdings (51%), then he or she would have full control of the cryptocurrency’s network and could “manipulate the public ledger (blockchain) at will.” This is in theory possible: because Bitcoin is “free and open,” any individual or group with enough compute power (and independent funds of their own) could seize control and manipulate the market (as there is no centralized authority to keep them from doing so).

This poses an interesting question for Bitcoin: with such an inherent flaw, what does its future look like? Although Bitcoin has been described as the perfect currency by Xu Mingxing, former CTO of the Chinese-language online social reading platform Docin, perhaps it’s time to reevaluate this standpoint.

In fact, it may be more productive to view Bitcoin as a platform, rather than the new staple in world currency. As noted in The Next Web, “It’s the underlying platform, the Bitcoin protocol aka Bitcoin 2.0, that holds the real transformative power.” Bitcoin is the first of its kind–a platform on which others can build, and that is only going to get better. As a truly disruptive and innovative concept, Bitcoin is setting the stage for further developments in digital payments. The important thing for businesses and technology providers to note is not whether or not Bitcoin is “successful” as a currency, but to realize how it may propel digital payments forward.

In a major step towards mainstream brick and mortar adoption, Revel Systems recently added Bitcoin compatibility to its iPad POS platform to allow merchants to offer consumers the ability to pay with the popular cryptocurrency. Integrations like this allow the industry to think towards what the future of a point of sale might need to survive in an ever changing consumer landscape that is inevitably going digital. How will consumers want to pay for things in the next decade, and what platform will a business need to support this in the next 5 years?

The question is not if consumers will adopt Bitcoin or other cryptocurrency, but when. Widespread adoption may happen slowly, and there may be fragmentation in the form of multiple kinds of cryptocurrencies. Multifarious payment forms will be the status quo for the next several years–a mix of standard as well new forms of currency. Digital currency–Bitcoin or otherwise–will be a significant part of this mix.

The future of currency is moving towards digital. Whether that currency is Bitcoin or not isn’t the issue. Companies need to start positioning themselves to be comfortable working with new forms of payment. The retail landscape is changing, and whether consumers are paying with dollars, bitcoins, credit, or Paypal, merchants need to be prepared.